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Systems and Logistics Foundations

Nike case study

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Introduction

Nike is a
well-known brand around the globe, specializing in the manufacturing of sports
clothing and it is very admired for it trainers by the young youth. After, achieving
vast amounts of success, throughout its career as a business in the competitive
ever-growing market, it has dominated the athletic apparel and shoes market in
America with a staggering figure of 62% compared to other businesses like
Adidas and Sketchers. Founded by Phil Knight back in the 1980s and 1990s, where
he used to run for his University team he wanted something better for footwear
and this was when it all started and by 1992 it had a turnover of $4.5 billion.

 

SWOT Analysis and commentary

Intro
sentence. Presented in Table 1.

Table 1

 

Strengths

Nike has
got various strengths which it can use on its competitors to dominate against,
and make its products more popular to increase sales, having sponsorships from
such advance athletes will be an incentive for customers as many admire them as
their role models and will want to follow their clothing fashion whilst playing
that sport, also because they are international level athletes this has led to
an high amount of increase in the percentage of sales for Nike and generating
high amounts of profits where it is reaching $1 billion dollar worth of sales
across the whole of Europe, Furthermore dominating sales In various countries
meant Nike had the power to compete against current businesses already in the
field and increase the image of its brand throughout various types of
consumers.

 

Weaknesses

The
downsides which are an obstruction to the business, can have major affects to
the efficient operation of Nike, having management that is arguing, shouting
for several months over a strategy and not coming to formal decisions does give
the business a bad image, as if the management up at the hierarchy Is not
stable and formal, then they will struggle to make decisions which satisfies
everyone’s needs in the business I.e. Shareholders, directors, also maintaining
other staff will cause major issues then.

 

Opportunities

Nike has been
viewed to be a very dominated business in the sportswear market, and with its
vast amount of success, it has been ranked as second in the global dominance
table, which is one behind Microsoft and overtaking Microsoft, would be very
beneficial for Nike as this will allow them to compete against any type of
business without any fear, this can be done by various long term and short-term
objectives such as: investing more into marketing, purchasing more technology.
Furthermore, in 1997 Nikes total sales of footwear were forecasted to reach 31
million pairs and apparel was expected to reach 27 million pieces, this was a huge
success not just financially but also displays a positive image of the business
and they can look to increase this figure. Also, Roger Tragesser setting out to
rethinking the Nikes European logistics from start, would mean more innovative
ideas, new traders, efficient ways of working too i.e. doing things which are
beneficial to the environment whilst working known as social corporate
responsibility (SCR).

 

Threats

Nike will
need to have contingency plans to overcome its threat such as the risk of
retailers not placing orders six months before will have a huge impact on the
operations as delays will be caused or a seasonal business means over produced
products may have to be wasted as they will be out of fashion next season and
people may not buy them next season.

 

Identification of main elements of a new
strategy

One of the
Strategies which Nike introduced was the “Future Programme” and Nike had a lot
of its sales based around this programme, this strategy involved bulk buying
(placing an order for a lot of products all at once) where retailers would bulk
buys six months before the selling season. This much-allocated time as Nike
could then plan out their orders, manufacture them according to the quantity
required and then sent to them by various ways of transportation i.e. shipping,
cargo, plane. However around 70-80% of transportation was done by shipping.
Some of the other elements of this strategy was that it did not please many of
their retailers, however they had to agree on this strategy, one because Nike
was able to impose it due its image and second because retailers would lose the
right to order replenishments during the course of the selling season.
Furthermore, elements like Nike was dealing with businesses which were
expanding internationally such as Olympus and Decathlon and because Nike as a
national organization was poorly structured, it was not possible for Nike to
serve these international retailers with the same prices in each country which
their branches were based in.

 

Role of systems thinking in this strategy

Systems thinking,
also described as a paradigm, which is a way of how something work in a certain
manner. Systems thinking involves the functioning of sub-inter related or
independent elements (mini-systems) which forms the whole system itself, each
element have its own functioning and contributes towards the overall
functioning of a system as they are all connected to each other. This can further
be described as a synthesis.

 

Each system
has boundaries which it is restricted to and it has inputs that results into an
output after being processed, the “Future Programme” strategy for Nike had
inputs from retailers where they would place their bulk orders for the products
6 months in advance, Nike would process this which is the manufacture stage of
proportion of its requirement and then the output which are the products
itself, Also, the transportation of goods to its desired retailers before the
selling season. Systems thinking plays a huge role in this strategy as its
about focusing on the functioning of each individual sub system and making it
as efficient as possible.

 

Four Fundamentals of supply chain management
(SCM)

Supply
Chain Management consists of 4 fundamentals: Aims/objectives, Philosophy, Managing
flows and relationships. All 4 of these fundamentals take an imperative role in
this strategy.

 

Nike will
need to ensure their objectives are related to their customers, they are
required to deliver the best customer service possible to the retailer outlets
which they deal with and for this to take place they will need to optimize cost
and investments. To satisfy their customer base, Nike will need to make sure
via their “Future programme” strategy they provide their customers with their
orders on the right time, the right quantity and the correct order itself, because
any issues arisen during the course of this can lead to dissatisfied customer,
which leads to a poor customer service and causes delays for the customers
(retailers) to then sell the products.

 

Next, Due
to the immense size of the business (Nike), making sure that the product
reaches the products to its retailers through the “Future Programme” it will be
required to pass via a series of complex movements, however the issue is for
any reason during this strategy the chain is broken or a part of the chain is
not completed then it may fail the whole process, this is a downside
financially. There are 3 types of supply chain “Macro”, this is external and
Nike will be extracting its raw materials i.e. cloth for apparel, materials for
shoes and then passing all this through to various stages for it to be
manufactured into finished products and then getting it to the end consumer
(retailers) who then sell it onwards, every link matters as value is added onto
the products and profit is generated as money then flows back down the chain.

 

Furthermore,
there is “micro” this is internal and consists of buy, make, store, move, sell.
Nike will use this supply chain within the business, they will take the bulk
orders from retailers, manufacture the goods which each retailer have asked for
and with the right amount of quantity, store it somewhere secure then transport
it to its national and international retailers via methods which they most used
which is shipping and then it will be the retailers job to ensure the goods are
sold to the customers in the market. This Micro supply chain works in
isolation, so it is imperative that the connection between each function is
strong and this Is where integration comes in which is making sure that there
is a strong bond between each stage, so they are monitored to be working
closely together as it leads to better efficiency and so each function is
effective towards this strategy.

 

The third
fundamental is managing the flows, with this process of supply chain there is
so much going and information, cash, materials all flowing and it is important
for Nike to manage all this in an integrated and holistic way as it is
considered as an effective and efficient manner, this will allow Nike to be
more organized with their orders and display professionalism to its
international/ national customers.

 

Relationships
is the fourth fundamental at this stage Nike will need to re-assess their
internal and external relationships with their customers (retailers) to which
they are transporting their stock to be sold onwards, both parties will need to
have a mutual consent as SCM is a “win-win” game as it is based on their
partnership of working a strong partnership will mean loyalty and long-term
relationship as the retailers will expect regular stock supply each season and for
Nike it will be benefit as they will be meeting their aims and objectives.

 

Logistics and transportation challenges and
role of technology.

Various
logistics and transportation challenges are faced by Nike, one of them is that Nike
needs to ensure their stock holding points are organized efficiently, as
footwear and apparel was stocked in separate stock points, managing all these
together, would mean additional costs and challenges to transport because most
of apparel was sourced from different parts of Europe in containers, it would
include additional charges such as: staff (drivers with suitable license), fuel
because they would have to drive to/ from different parts of Europe with loaded
container trucks and as the busy season arrives with an increase in the number
of sales, this would mean additional transportation charges and more staff as
more goods have been ordered and needs to be with the retailers/ customers as
many customers had placed ordered months in advance. Furthermore, by many
socks, pants etc. was ordered and most of these were sourced and stocked in
different parts of Europe separately, this is a challenge because if customers
order them along with shoes then they will need to be sourced from the place
where they are manufactured and then collected at one place and then there’s
the issue of shipping it to the customers which is a lengthy process.  

 

Technology
play huge role in this because every country is developing at different speeds
with technology so it is important there is a sensible investment so things
like on-line stock systems are made which can be accessed globally by various
manufacturers and sources to communicate via, or for the company and customers
to track drivers and see where different orders are around the world. However,
the downside of technology is the cost of implementing such big systems and the
process of developing them alongside, security such as hacking.

 

 

 

 

 

Conclusion

Overall, if
Nike wants it strategy of Future programme to be successful then they will need
to look more into its weaknesses and develop on them, they will also need to
look and invest onto other parts of business i.e. investing more in marketing
to advertise its products more, Human recourses HR to have more incentives for
employees to retain skilled staff for long period of time. Other than that,
Nike has got a bright future by being the market leader already it can expand
more as a business in future and achieve its goals.

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